Proposed Presidential Tax Executive Order
On Saturday, the 8th, President Trump issued an executive memorandum regarding a payroll tax delay. The memorandum directs the Secretary of the Treasury to implement a delay of certain employees’ obligations to pay Social Security taxes. The payroll tax provision requires guidance to be issued by the Department of Treasury. Until that guidance is issued, many of the details are unknown.
Below is a summary of the key provisions of the memorandum:
- The memorandum applies to the period September 1, 2020, through December 31, 2020.
- It is unclear whether employers are required to take advantage of the delay.
- The memorandum does not address what an employer should do if he decides to continue withholding payroll taxes.
- The memorandum only applies to the 6.2 percent Social Security tax on employees.
- The memorandum only applies to employees generally earning less than $104,000 annually.
- The memorandum only provides a delay of the tax obligation, not forgiveness.
- No penalties or interest shall apply to those who use the delay.
- There is no relief with respect to employers’ withholding obligation.
It is important to keep in mind that Congress and the Trump Administration are still negotiating on a potential COVID-19 relief measure, and that a compromise bill could supersede the President’s actions. As this situation becomes clearer, we will update you on what to expect and what actions to take.
Update: August 25, 2020
We – along with the rest of the business community – are awaiting guidance from the Treasury Department to implement this memorandum. We know that the Secretary of the Treasury, Steve Mnuchin, has stated that participation will be voluntary – meaning an employer can choose not to allow their employees to take advantage of this deferral. In addition, the President’s top economic advisor, Larry Kudlow, stated that the President is looking for ways to “fully forgive” the payroll tax deferral. But nothing has been issued in writing from any US Government entity.
With one week left before the memorandum goes into effect, we are all waiting for Treasury to issue guidance on how the payroll tax deferral will work. We of course will let you know as soon as that happens.